AI-generated visual representing confident board leadership navigating uncertainty – inspired by the themes explored in this article.
In a recent article, Anjli Raval, Management Editor of the Financial Times, opened with the question ‘How can companies plan ahead when it feels like tomorrow may look nothing like today? It’s the question hanging over boardrooms as business leaders contend with a barrage of challenges…’
In the following opinion piece, we suggest an answer.
Purpose of the board
The board’s role is the look after the future of the company and the business it runs. This is the case whether the business is run by its owners or whether the board represents the interests of the main stakeholders in looking after their long-term interests in the company. Fundamentally, this means that the goal of the business and the supporting business model must remain valid, while complying with all the relevant rules and regulations, and with a culture which is acceptable in the societies in which the company operates.
The board’s responsibility, in looking after the long-term future, is therefore to constantly check the validity of the goal and the effectiveness of the strategy adopted to achieve it. And to modify the goal and strategy if appropriate, while ensuring that the revised goal still meets the objectives of the key stakeholders, namely the customers, owners and employees.
Recent Events
In recent years we have seen the global impact of the Covid pandemic, the Russian invasion of Ukraine and most recently the election of Donald Trump as President of the United States.
The Covid pandemic caused confusion as countries sought ways to cope, ranging from total lock-downs to vaccine-facilitated, restricted normality, leading to the so-called working from home – a radical change which has endured to this day.
The Russian invasion led to sanctions, resulting in challenges to manufacturing value chains, and radical impacts on energy supplies and pricing.
The election of Donald Trump has produced potentially the most radical threat to the post-war global agreements on trade, coupled with frequent policy changes emanating from the most powerful nation in the world.
Pressures on Strategy
So, the events of the last six years, and, indeed, the long-term impact of the financial crisis of 2008, have resulted in significant uncertainty about what is coming both domestically and internationally.
There are the direct impacts on a business’s fundamental structure, such as the effects on the value chains, access to key minerals, costs of energy, and the degree of resilience the business possesses to cope with radical changes. Then there are the indirect effects such as the growing importance of global sustainability, national risk management and social behaviour and new regulations governing these factors.
Emerging are even more unpredictable developments such as AI and its impact on the company’s business model, its potential to create radical competition, and what it may do to employment requirements.
In such fast-changing times, the board cannot rely on the traditional annual away-day meeting to discuss strategy and the 5–year business plan, if it is to keep the company safe and solvent. So, how can it see through the fog ahead while being fed board papers consisting of monthly accounts, sales forecasts, reports on operating efficiencies, and periodic reviews into areas of concern or perceived potential opportunities?
Does it employ strategy consultants at great expense to present a range of possibilities and options for modifying strategy or even the basic goal?
Modifying strategy through continuous monitoring
There is a much better and more economical answer.
The key requirement is to know what the key stakeholders are thinking in these uncertain times, to keep right up to date on their view of the future, and how they view their own objectives for the future. This is the only way to safeguard the future of the business. So how to introduce a system which provides this vital information on a continuous basis?
The answer is to create a stakeholder engagement framework, structured to provide the insight into how the company’s objectives, its operational performance, and its culture may need to be adapted to keep the show on the road going forward in these uncertain times.
The four vital elements to what we call Dynamic Stakeholder Engagement are:
- regular communication with key stakeholder groups, dealing with issues at a high level, to provide a ‘sniff test’ of potential future problems and opportunities, a prompt indication of the impact of business initiatives, and an early alert to trends
- weighting of responses according to the relative importance of the stakeholder to the current corporate goals and the materiality of the subject of the survey questions so that the influence on decisions can be proportionate
- administration of the system at the highest level (the office of the chairman) to avoid capture by internal functions
- structuring the survey so the results can feed quickly to management action
The survey can be conducted in one of two ways, or both if appropriate:
- through focus groups set up for each of the main stakeholders
- through direct surveys of the main stakeholders
Like an accounting framework, set out in a chart of accounts, reflecting income, expenses, assets and liabilities, this holistic framework is constructed to feed into the corporate strategy, and, like regular monthly accounts, the feedback from this inexpensive, high-level stakeholder engagement is provided on a continuing basis for the regular board meetings, supplying the board with forward-looking data to make the best decisions for the future of the company.
Unlike an accounting system, however, which analyses historical data, this is forward-looking to reduce the impact and dangers of uncertainty in this rapidly changing world.
Fulfilling the purpose of the board
This is a holistic way to approach the fundamental board duty of safeguarding the future of the business through constantly reviewing and balancing the objectives of the key stakeholders in the business, particularly customers, employees and owners, since the compatibility of their individual objectives is key to the future success of the business.
In summary, Dynamic Stakeholder Engagement:
- provides a new and continuous forecasting system, highlighting risks and opportunities to help the Board fulfil its over-riding duty to safeguard the future of the business, and
- is focused on delivering on-going performance improvement, thereby providing a valuable broad-ranging new tool to assist the Broad in its role of getting the best out of the management.
